Methodology for UN Scale of Assessments 2019-2021

1. The methodology used for the preparation of the United Nations scale of assessments for the period 2019-2021 79th Session of the Committee on Contributions3-21June 2019 Statistics Division DESA, United Nations

2. Outline • Introduction • Main components of the methodology • Data sources • Step by step calculation - Example

3. Introduction • The aim of this presentation is to provide an overview of the methodology for calculating the scale of assessments for the contribution of Member States to the regular budget of the United Nations.  • Article 17 of the Charter of the United Nations provides that Member States have the obligation to bear the expenses of the Organization, as apportioned by the General Assembly. • The fundamental principle underlying the apportionment by the Assembly is based broadly on the capacity of Member States to pay, in accordance with rule 160 of its rules of procedure.

4. Introduction • The General Assembly in resolution 73/271 (establishing the 2019-2021 scale) reaffirmed that the Committee on Contributions (CoC) as a technical body is required to prepare the scale of assessments strictly on the basisof reliable, verifiable and comparable data. • The CoC (A/73/11, para. 20) noted the trade-offs between timeliness, reliability, verifiability and comparability of the data. • The methodology presented here is based on Annex II of the Report of the Committee on Contributions (A/73/11) and was used for the 2019-2021 scale calculations; same methodology that was used since the 2001-2003 scale.

5. Main Components of the methodology

6. Main components of the methodology • In resolution 73/271, the GA determined the elements of the scale calculation for the 2019-2021 period. • Three main components of the methodology: • Comparative estimates of income • National Income (1946) • Conversion rates (1946) • Base period (1946) • Two base periods: 3 and 6 years (2001) • Relief Measures • Debt burden adjustment (1986) • Low per capita income adjustment (1946) • Limits to scale • Floor (1946) • LDC ceiling (1983) • No increase for LDC (1983-1997) • Ceiling 0.010 per cent (1998) • Maximum ceiling (1946)

7. National income • Income measure is the first approximation of the Member States’ (MS) capacity to pay. • Gross National Income (GNI) is used as the income measure. • The national income of an economy represents the income of its residents. It is obtained by adjusting the Gross Domestic Product (GDP) with the income of residents from activities abroad and the income of non-residents from activities in the country: GNI = GDP - primary incomes payable to non-resident units + primary incomes receivable from non-resident units

8. Exchange rates • To establish a comparable measure of income, GNI in national currency is converted to United States dollars (US$) using market exchange rates (MERs). • For MS for which no MERs are available, United Nations operational rates (UNOP) of exchange are used instead. • When MERs cause excessive fluctuations and distortions in the GNI of a particular MS, MERs may be replaced with price-adjusted rates of exchange (PARE) or other appropriate conversion rates.

9. Systematic criteria Member State Step 1 -Exchange rate has been fixed -pcGNI in US$ is unreasonable • No • Yes • MER may be adjusted Step 2 pcGNI growth factor ≥ 1.5 times or ≤ 0.67 times world average pcGNI growth factor • No • Yes • MER not adjusted • Step 3 • MER valuation index (MVI) ≥1.2 times or ≤ 0.8 times world average MVI • Yes • No • MER may be adjusted • MER not adjusted

10. Base period • Final scale is calculated based on the arithmetic average of scales from the most recent three-year and a six-year base periods. • Each of the most recent three years receive 25 per cent of the total weight, and each of the remaining three years receive about 8.3 percent of the total weight.

11. Debt burden adjustment • Debt burden adjustment (DBA) is an element of the methodology to relieve the impact of the repayment of external debt on the capacity to pay. • The DBA is applied to MS with a per capita GNI below the World Bank threshold for high-income economies. • Since interest payments are already accounted for in the GNI, only principal payments on external debt are deducted from GNI. • Indirect redistribution: new GNI shares are based on the debt-adjusted GNI (GNIda).

12. Debt burden adjustment • DBA is based on a proportion of the total external debt stock of the MS concerned  debt stock approach. • It is assumed that external debt is repaid over a period of 8 years. 87.5% 12.5% DBA: amount deducted from GNI

13. Low per capita income adjustment • Income per head of population should be taken into account to prevent anomalous assessments based on comparative estimates of national income (A/73/11, para. 51). • The Low per capita income adjustment (LPCIA) provides relief for MS based on per capita GNI (pcGNI). • It consists of two parameters to set the size of the adjustment: • the threshold to determines which MS benefit from the LPCIA (average pcGNI of all MS); • the gradient (80 per cent).

14. Low per capita income adjustment • LPCIA reduces the GNIda share of the affected MS by a factor that is based on the percentage that the pcGNIda is below the established LPCIA threshold, subject to the gradient: • Calculate the percentage difference between the pcGNIda and the threshold. • Multiply this percentage with the gradient of 80 per cent. • Reduce the MS GNIda share with this percentage. • Redistribution to MS above the threshold on a pro rata basis of their GNIda share.

15. Limits to scale • Floor: The minimum assessment rate. • Two ceilings: • A ceiling limit for the Least Developed Countries (LDCs). • A maximum ceiling.

16. Floor • Floor is an element of the methodology since the outset. • It changed from 0.010 to 0.001 per cent since the 1998-2000 scale. • Redistribution of the adjustment is on a pro rata basis to MS above the floor. Scale

17. Ceilings • Ceilings are the maximum assessment rates. • Pro rata redistribution: LDC ceiling points are distributed to all MS except those at the floor; points at maximum ceiling are distributed to all MS except those at the floor and at the LDC ceiling. MS Maximum Ceiling 22.000 Scale LDCs 0.010

18. Overview of the process Steps 7-9 Step 1 Steps 2-6 Step 10 Income Measure Relief measures Limits to the scale Machine scale for 3-year base period GNI in national currency Debt burden adjustment Floor Average of machine scales Conversion rates LDC ceiling Machine scale for 6-year base period LPCIA GNI in US dollars Maximum ceiling

19. Data Sources

20. Data Sources: National Income • National Income • Data are provided, in national currency, by MS to UNSD in response to the United Nations annual national accounts questionnaire. http://unstats.un.org/unsd/nationalaccount/madt.asp?SB=1&#SBG • When data are not available from the MS, UNSD prepares estimates based on available information from other sources including: MS publications, UN regional commissions, the World Bank, and the IMF.

21. Data Sources: National Income • UNSD disseminates the national accounts data in two separate databases: • The data in national currency from the AMA database are used in the scale calculations. • National Accounts Statistics, Main Aggregates and Detailed Tables (MADT) database, available at: http://data.un.org/Explorer.aspx?d=SNA • National Accounts Statistics, Analysis of Main Aggregates (AMA) database, available at: http://unstats.un.org/unsd/snaama/Introduction.asp

22. Data Sources: Exchange rates • Exchange rates • Market exchange rates (MERs) from the IMF publication International Financial Statistics, available at: http://www.elibrary.imf.org/browse?freeFilter=false&pageSize=10&sort=datedescending&t_7=urn%3ASeries%2F041 For non-members of IMF, there are no market exchange rates available and the rates used are average annual United Nations operational (UNOPs) rates of exchange, available at: http://treasury.un.org/operationalrates • Exchange rates are used for the conversion of national currencies to United States dollars.

23. Data Sources: External debt data • External debt data • Data are obtained from the World Bank International Debt Statistics Database, available at: http://datatopics.worldbank.org/debt/ids/ • The database covers members of and borrowers from the World Bank that have per capita GNI below the World Bank threshold for high-income economies, which was $12,236 in 2016. • In addition to the 123 MS covered in the database, 3 other MS provided data through their Permanent Missions for the calculation of the adopted scale of 2019-2021. • Total external debt stock data are used for the debt relief adjustment.

24. Data Sources: Population estimates • Population estimates • Data are obtained from the biennial publication: World Population Prospects prepared by the Population Division of the Department of Economic and Social Affairs. • Further details on the methodology can be found at: http://esa.un.org/unpd/wpp • Midyear estimates of total population are used to calculate per capita GNI (pcGNI). • These estimates are supplemented, as required, by national estimates for countries and areas not included in theWorld Population Prospects.

25. Overview of the data preparation process for the 2019-2021 scale calculation Data relevant for the 2011-2016 base period are finalized GNI data available up to 2016 NA Questionnaire sent to MS 2017 Data validation 2018 GA CoC Calculation of the scale for the CoC Adoption of the 2019-2021 scale of assessment Population data (July 2017) Exchange rates available up to 2016 Debt data available up to 2016

26. Step by step application of the scale methodology Example of Australia and Bangladesh using the six-year base period 2011-2016

27. Step by step application of the scale methodology Step 1: Comparable measure of national income GNI in national currency (NC) GNI in US$ National currency to US$ exchange rates

28. Step by step application of the scale methodology Step 1: World GNI in US$ The average world GNI for the six-year base period 2011 to 2016 is $75,877,130 million

29. Step by step application of the scale methodology Step 1: MS’ share in world GNI

30. DBA calculation Step by step application of the scale methodology Step 2: Debt Burden Adjustment World GNI $75,877,130 million Debt deducted $815,429 million Debt adjusted world GNI $75,061,701

31. Step by step application of the scale methodology Step 2: Debt Burden Adjustment

32. Step by step application of the scale methodology Step 3: LPCIA threshold $10,476 World population7,242,786,811 World GNI$75,877,130 million LPCIA threshold per capita GNI

33. Step by step application of the scale methodology Step 4: Member State per capita debt adjusted GNI • pcGNIda Member State GNIda Member State population

34. Step by step application of the scale methodology Step 5: Calculating LPCIA 2. That is multiplied by the gradient (since 1998-2000 scale: 80 per cent). 3. MS GNIda share is reduced by a corresponding percentage.

35. Step by step application of the scale methodology Step 6: Application of the LPCIA • For each base period, the total LPCIA is reallocated pro-rata to MS whose average pcGNIdais above the threshold. • For illustrative purposes, to demonstrate the outcomes with and without maximum ceiling rates, two tracks are calculated.

36. Step by step application of the scale methodology Step 6: Application of the LPCIA – Track 1 *excluding the ceiling Member State

37. Step by step application of the scale methodology Step 6: Shares at the LPCIA step

38. Step by step application of the scale methodology Step 7: Floor limit The ceiling Member State does not take part in this step of the methodology

39. Step by step application of the scale methodology Step 7: Shares at the floor step

40. Step by step application of the scale methodology Step 8: LDC ceiling The ceiling Member State, and the floor Member States do not take part in this step of the methodology

41. Step by step application of the scale methodology Step 8: Shares at the LDC ceiling Shares after the LDC ceiling application

42. Step by step application of the scale methodology Step 8: Maximum ceiling step The floor Member States and the LDC ceiling Member States do not take part in this step of the methodology

43. Step by step application of the scale methodology Step 9: Shares at the maximum ceiling step

44. Step by step application of the scale methodology Step 10: Final Step 2

45. Thank You